Monthly Archives: June 2017

On the Fine Art of Forecasting Peak Load Demand

Posted on June 30, 2017 by | 22 comments

Comparison of Dominion and PJM growth forecasts in peak load. Source: Dominion 2017 Integrated Resource Plan.

Billions of investment dollars ride on the long-range forecast of Dominion’s peak load electricity demand. But whose projections do we believe — Dominion’s or PJM’s?

In its 2017 Integrated Resource Plan (IRP), Dominion Energy forecasts the increase in its peak electric load and anticipates what combination of new gas, solar and nuclear facilities it will take to meet that demand. Although the IRP is a highly technical document, against the backdrop of the debate over the future of Virginia’s electric grid, it has major political implications. Environmentalists argue that Dominion overstates future electric load and, consequently, it overestimates the number of new combustion turbines (gas-fired turbines designed to generate electricity on call) or the amount of new nuclear capacity that it will need to add.

As evidence, Dominion’s opponents point to the 2017 peak load forecast by PJM Interconnection, the regional transmission organization of which Dominion is a part. Where Dominion’s IRP projects an average annual increase in summer peak load of 1.4%, PJM projects an increase of only 0.4%. Projected over the 15-year planning horizon of the IRP, that amounts to a tremendous difference in peak electric load, as can be seen in the graph above.

Needless to say, Dominion defends its forecast, and offers detailed reasoning in the IRP to support its position.

Which forecast is correct? That of Dominion, which has a more intimate, granular knowledge of its service territory, of that of PJM, which has no profit-maximizing agenda?

It might come as a surprise to outsiders, given the big gap between their projections, but Dominion and PJM coordinate their planning and forecasts very closely. In most ways, the two forecasts are closely aligned. In PJM’s estimation, the difference boils down to two main factors: (1) the assumptions that Dominion and PJM make about the growth in demand from energy-intensive data centers beyond 2021, and (2) assumptions about how to account for rapidly “behind-the-meter” electric generation by homeowners and businesses. To those two issues, Dominion adds two more arcane issues of methodology.

Data centers. Data centers figure largely in Dominion’s forecasts because Northern Virginia has emerged as one of the world’s leading clusters of energy-intensive server farms, drawing upon the region’s rich network of high-capacity fiber-optic cable, low-cost electricity, tech-savvy workforce, and friendly state-local policies. Having observed the success of Loudoun County, other Virginia localities from Virginia Beach to Wise County in far Southwest Virginia, are getting into the act.

Data centers are an anomaly for economic and electric-load forecasters. Because they are such big consumers of electricity to run thousands of servers and cool the heat they throw off, they skew the normal relationship between economic growth and energy consumption. Accordingly, Dominion and PJM have to make special adjustments to their economic models to take them into account.

“Each year Dominion comes to us with information about their projections of data center growth,” says Tom Falin, director of resource adequacy planning for PJM. “We do analysis to see if that growth is already embedded in our forecast. In general, it isn’t. [Data centers] put a drain on the energy grid that’s not normally associated with economic growth — there’s not a lot of employment and housing associated with it.”

Data-center loads reached more than 800 megawatts by 2016 and are projected to amount to 1,500 megawatts by 2021.  That compares to a total peak load of about 20,000 megawatts for Dominion. PJM estimated that it needs to adjust Dominion’s peak load forecast upward by 500 megawatts by 2021 to account for the data centers. At that point, says Falin, PJM assumes that the growth in energy demand will be embedded in the historical load history and won’t require further adjustment. “Perhaps Dominion is assuming stronger growth in these data centers than we are.”

Indeed it is. As Dominion explains in its 2017 IRP:

PJM has eliminated new data center growth in the DOM Zone beginning in 2021 – in other words, it excluded incremental data center growth beyond what is captured in historic trends. This is a significant change from PJM’s 2016 peak demand forecast, which included new data center growth continuing for the balance of the forecast. In comparison, the Company utilizes historical trend data center load coupled with interconnect data from new and existing data center customers to forecast data center growth within its service territory. Over the longer term, the Company relies on data center forecasts that are included in a 2015 study prepared for the Company by Quanta Technology, LLC, entitled “Dominion Northern Virginia Load Forecast.”

The difference between the Dominion and PJM forecasts can be seen in this graph taken from the 2017 IRP:

Source: Dominion 2017 IRP.

The dotted line shows what PJM’s peak demand forecast would look like if adjusted for data-center growth. Continue reading →

22 Comments

Posted in Energy, Planning

Tagged ,

Fralin Assumes SCHEV Leadership

Posted on June 29, 2017 by | 2 comments

F. Heywood Fralin. Photo credit: Roanoke Times

The State Council of Higher Education for Virginia (SCHEV) elected W. Heywood Fralin, a prominent Roanoke businessman and former rector of the University of Virginia, as chairman Wednesday.

Fralin replaces G. Gilmer Minor III, much beloved by SCHEV staff and fellow council members, who after two terms was ineligible for reappointment to the board. Minor, who also retired recently as chairman of medical distribution giant Owens & Minor, Inc., had been instrumental in persuading the McDonnell administration not to axe the once-troubled Council and then acted to restore its credibility with lawmakers.

“I look forward to working with my fellow Council members in leading Virginia’s system of higher education to even higher levels of excellence,” Fralin said. “Virginia is fortunate to have so many superb colleges, universities and career-training schools — they truly are our crown jewels. It is an honor to work with them for the good of the Commonwealth.”

G. Gilmer Minor. Photo credit: Richmond Times-Dispatch

The consummate Virginia gentleman, the 72-year-old Minor was known for his self-effacing leadership style and his penchant for praising the contributions and accomplishments of others. When introducing staff and other speakers at SCHEV meetings, he would always find something positive to say — often expostulating at some length. At his final board meeting in May, Fralin and SCHEV Director Peter Blake lauded him for his eight-year contribution.

Minor joined SCHEV in 2009, at a low point in its history. The legislature had established the Council as the state entity responsible for coordinating Virginia’s highly decentralized system of higher education. The council had seen significant turnover in its senior staff, Minor told Bacon’s Rebellion, and relations were strained with the colleges and universities it oversaw. Minor, who had just come finished a term as chairman of the Virginia Military Institute, said VMI almost regarded SCHEV as the “enemy.”

When Bob McDonnell came into office in 2010 on a platform of cutting state government, he gave serious consideration to eliminating SCHEV. Minor made it his mission to save the council and rebuild its credibility. Thanks in large part to Minor’s efforts, McDonnell spared the council. Minor spent considerable time with legislators, explaining SCHEV’s role and advocating the interests of higher education. SCHEV has functioned without major controversy ever since.

Fralin will bring a different style to SCHEV — from my few months of covering the council, he seems more blunt-spoken than Minor — but I expect the 62-year-old chairman of the Medical Facilities of America, a provider of skilled nursing and rehabilitation services — to play a similar role as advocate for Virginia’s higher-ed system.

In addition to serving as rector, Fralin has given generously to UVa, most notably a 40-piece art collection, which includes works by John Singer Sargent, Mary Cassatt and Robert Henri. The donation was the largest single art gift in the University’s history.

2 Comments

Posted in Education (higher ed), Uncategorized

Tagged ,

The Terrifying Power of the Media to Shape Opinion

Posted on June 29, 2017 by | 19 comments

Only 18% of Americans support the U.S. Senate healthcare bill to replace Obamacare, says one poll. Only 12%, says another, and only 8% says yet another. Given the slow-motion collapse of Obamacare, that’s remarkably low. With numbers that low, even a majority of Republicans must oppose the bill.

Could the public’s negative opinion be shaped by the fact that the media has overwhelmingly portrayed the bill in overwhelmingly negative, even apocalyptic, terms?

A big drawback of the bill is that health care insurance would be more expensive for older Americans. I Googled the phrase, “Senate healthcare bill more expensive for older adults.” Every article cited on the opening page stressed the harm that the bill would do to seniors. Seventy-five percent of Googlers never go past the first page of results. To find countervailing analysis, searchers would have to dive way deeper into the results.

An offsetting benefit is that the bill would make health care insurance cheaper for young adults and free them from the Obamacare mandate of purchasing insurance. So, I Googled the phrase, “Senate healthcare bill cheaper for young adults.” The opening page was a mixed bag. Some results were balanced and some negative. None were positive. Here are the headlines:

9 Things To Know About The Senate Health Care Bill (NPR). The article notes, “The oldest people under 65 can be charged five times more than the youngest, and maybe more depending on state rules.” It says nothing about young adults paying less.

How the Senate’s Health-Care Bill Would Cause Financial Ruin for People with Preexisting Conditions (Atlantic). The headline speaks for itself. The article doesn’t even address the issue of how young people are impacted.

Winners and Losers of the Senate’s Health-Care Bill (CNBC). This article does acknowledge that young adults would benefit: “The Senate plan, like the House bill, would give insurers greater flexibility to charge younger enrollees much lower premiums and to offer skinnier plans in states that opt out of ACA’s essential health benefit requirements.”

The Senate health care bill: What’s in it and what to watch for in the CBO report (Politifact). This article provides a balanced statement: “Today, companies can’t charge older customers more than three times what young adults pay. The Senate bill increases that to five to one. This change reduces premiums for the young and increases them for those in their 50s and early 60s.”

Senate health plan falls short of promise for cheaper care, experts say (New York Times). The Times article presents a uniformly dismal view of the bill, noting no positives of any kind.

Senate Health Bill Includes Deep Cuts to Medicaid (New York Times). This Times article tells how older Americans would be disadvantaged under the bill but ignores the offsetting advantages to younger Americans. “Older people could be disproportionately hurt because they pay more for insurance in general. Both chambers’ bills would allow insurers to charge older people five times as much as younger ones; the limit is now three times.”

The Senate health bill is brutal on older Americans (Slate). The first paragraph in this Slate article is as balanced as it gets: “One of the expressed intentions of Republicans’ efforts to repeal and replace Obamacare is to undo some of the age-related distribution inherent in the system. Today, healthy young people pay more so that older, less-healthy people don’t have to pay quite as much.” Then Slate goes relentlessly negative for the rest of the article.

Comparing the Senate health care bill to Obamacare and the House proposal (CNN). This CNN article does note that the Senate bill will repeal the mandate for adults to obtain health insurance or pay a penalty.

Senate health care bill would lower deficit, increase number of insured, estimate says (FOX). The Fox article addresses pros and cons of the bill, but nowhere does it mention how the bill would lower premiums for young adults.

The Senate health-care bill’s subsidy cuts hurt low-income, older Americans (Washington Post). While the headline is negative, the article itself is more balanced, acknowledging that young people would benefit from allowing insurers to base rates on age. “Both [the House and Senate] bills include changes that would mean older people pay more and younger people pay less.”

Summary: The results on a search inquiring about a negative aspect of the bill brings up uniformly negative and critical articles. The results on a search inquiring about a positive aspect of the bill brings up a mix of negative and balanced articles — but no positive articles. Continue reading →

19 Comments

Posted in Health Care, Media

Tagged

Two More Signs that City of Richmond Is Kicking Donkey

Posted on June 28, 2017 by | 1 comment

Kicking donkey

The City of Richmond is on a tear. Not only is it seeing more real estate investment than it has it decades, the city is laying the groundwork for future growth and re-development. Its competitive advantage over neighboring suburban counties seems to get stronger with every passing day.

Word has leaked to local media of a privately led plans to replace the aging Richmond Coliseum as part of a larger initiative to revitalize a critical piece of the downtown district. A small working group led by Dominion Energy CEO Thomas Farrell and including Virginia Commonwealth University and the Altria Group has confirmed its desire to replace the decrepit Coliseum civic arena, which suffers from major deficiencies and drains $1.6 million a year from city coffers. Plans include a hotel to serve visitors to the nearby convention center, and encompass the historical Blues Armory building.

The working group, which is so preliminary that it does not yet have a name, is not ready to release details on the scope of the project, its cost or its financing.

Normally, when I hear of civic leaders talking up a big downtown redevelopment project, I immediately reach for my wallet. Most schemes call upon city governments to make major financial contributions, which are justified on the basis of fantasy projections of jobs, tax revenue, and spin-off investment. All too often these projects experience cost overruns, or projections fall short. (Just ask the City of Norfolk, which had its “donkey” handed to it for cost overruns of the Tide light rail project, and more recently, the Virginian-Pilot reports today, experienced a $16 million cost overrun on the $105 million Main hotel and conference center project downtown.)

But the larger point is that downtown Richmond excites the interest of the city’s major institutions and business leaders. There is something to work with. The Biotechnology Research Park has transformed the area to the north and east of the Coliseum. The neighboring Jackson Ward district to the west has been gentrified. Broad Street to the south is roaring back.  Developers are converting warehouses and obsolete office buildings into apartments and condos downtown. The Coliseum’s location is prime real estate, and it is under-utilized. Who knows, miracles do happen. Perhaps it will prove possible to re-develop the land around the Coliseum without massive subsidies.

A significant side benefit of a re-development project would be to improve connectivity downtown. As the Richmond Times-Dispatch reports: “The plan envisions a transformation of the traditional street grid, now partly sunken below grade in places and blocked entirely in others” to better connect the VCU health system, the government center around City Hall, and the biotechnology research park.

An impetus behind the initiative was the city’s commitment to build Bus Rapid Transit along Broad Street. The draft Pulse Corridor Plan calls for exploiting the “opportunity area” in the vicinity of the Coliseum. As it happens, the Pulse also will serve the Scotts Addition district, which the city is in the process of rezoning to maximize re-development opportunities.

The Pulse is expected to commence operations in October. One of its ten stops serves Scotts Addition, a light manufacturing district that has been transformed by the conversion of brick industrial buildings into apartments, condos, offices, restaurants, and breweries. City planners call for two new zoning districts: transit-oriented development (TOD) along the Broad Street corridor, and mixed-use for the rest of Scotts Addition.

The city’s planning staff calls the draft TOD-1 district “unabashedly urban,” reports the McGuireWoods land use team. The recommended ordinance is “intended to encourage redevelopment and place-making, including adaptive reuse of underutilized buildings, to create a high-quality urban realm.” Zoning would require walkable streetscapes and allow buildings of up to 12 stories in height. Most buildings would have a maximum setback of 10 feet. Parking requirements would be lifted for all uses other than hotels and large, multifamily residential buildings.

Beyond the Broad Street corridor, Scott’s Addition would be rezoned from light industrial to a mixed-use business district. Zoning would encourage “street-oriented commercial” corridors, requiring street-front retail as part of any residential use, and prohibiting car-oriented uses like gas stations and parking decks. Amendments would permit “maker” light manufacturing uses of under 10,000 square feet, which, if approved, could extend the ongoing boom in breweries, cideries and distilleries.

If both rezonings are approved, says the McGuireWoods land use team, “there may be significant opportunities for RVA’s commercial real estate community to actualize the city’s vision for denser, more urban development in this area.” 

The Pulse extends into Henrico County, terminating near the Willow Lawn mall. If county officials are planning to take advantage of the BRT service, there is no sign of it in my Google results. The only rezoning activity near Willow Lawn took place last year: approving a development and lighting plan for a Chick-fil-A.

One positive sign, however, is that Henrico has hired Clarion Associates to lead a comprehensive update of its zoning and subdivision ordinances — the first such effort in six decades. The revisions are expected to take two years, however, so even if the county commits to a vision of selective urbanization, the city of Richmond likely will continue to whup donkey.

1 Comment

Posted in Economic development, Land use & Development, Planning

Tagged

Metro Sales Tax: Bad for Virginia, Worse for Loudoun

Posted on June 28, 2017 by | 17 comments

by Dave LaRock

The Washington, D.C., Metro system serves three jurisdictions: Maryland, Washington DC and Virginia. The Virginia jurisdiction includes Alexandria, Arlington, Fairfax City, Falls Church, and, starting in 2020, Loudoun County. For several years, D.C.-based interest groups have been pushing for a 1% sales tax increase across the region served by Metro to fill a funding gap currently estimated at $7.5 billion over ten years.

While this may sound like a reasonable proposition to some, when you drill down it becomes clear this is very unbalanced against Virginia and even less equitable for Loudoun County.

Right now there is a funding ratio in place whereby Metro funding needs are divided between the three jurisdictions. This funding ratio is based on track miles, number of stations, ridership, etc. Virginia is assessed 28%, WDC 37% and Maryland 35%. The proposed 1% sales tax would have Virginia paying over half of the money needed to fill the $7.5 billion funding gap. In 2019, Virginia’s share will increase as Loudoun will also start paying a share for the maintenance and operations of the overall system.

But for Loudoun it is far worse. Much of the $7.5 billion funding gap is needed to make repairs that are decades overdue and rightfully should have been completed years before Loudoun joined the partnership. Just to put this in perspective, if Loudoun was a paying member in 2016, the proposed 1% sales tax would have cost Loudoun $74,949,695, and that number is increasing rapidly. In the last 2 years, Loudoun’s sales tax revenue increased 23%; that’s more than the other affected Northern Virginia jurisdictions increased in the last 10 years! If the proposed tax is levied with permission from the General Assembly, Loudoun County would pay at least $80 million per year going forward.

That is a pretty hefty share considering the Metro will only come 1.7 miles to one station past MWAA/Dulles Airport land into Loudoun; MWAA will have 4.9 miles of track and two stations on Dulles Airport land. The total system at that point will be 129 miles with 97 stations. Also realize that Loudoun will not be using Metro’s bus service, and that Loudoun and Fairfax folks are already contributing billions of dollars in tolls and taxes to fund 100% of the Silver line, as well as over one quarter of the 7000 series “New Cars” that will be in service throughout the Metro system by the end of this year.

It is outrageous to ask all Loudoun County residents to pay money into a Metro system every time they purchase a taxable item; most residents use the Metro rarely, if ever.

To a large degree, the high cost of bringing the Metro system to a reasonable state of repair is due to decades of mismanagement. Safety and reliability have plummeted, and so have ridership and revenues. Most of the $7.5 billion total “funding gap” can be attributed to capital projects: WMATA needs new cars and major track refurbishment.

It is essential that as we work to fix Metro, we do not lose sight of the importance of being fiscally responsible and the need to limit taxation. These are basic principles of sound government: Excessive taxation has a negative effect on economic activity and family budgets.

Simply handing more revenues to WMATA without fixing its foundational issues is not a responsible solution. There are significant reforms to Operations and Management that must be made as well. Metro’s new General Manager, Paul Wiedefeld is doing a great job at getting the ball rolling in the right direction, but that’s not enough. Metro has problems that go much deeper than lacking cash. Operating expenses (mostly labor) are growing at nearly twice the rate of revenues and this requires significant changes in the business model. The WMATA Compact binds the three main jurisdictions and governs the management of the system. The Compact is outdated and needs to be revised. In fact, Virginia has already passed multiple revisions which, if accepted by Maryland and WDC, would substantially improve the Compact. Last, but not least, the WMATA Board is too large and is staffed with too many people who do not have the expertise needed to whip the Metro into good shape and keep it that way.

In 2012, Loudoun County supervisors voted 5 to 4 to extend Metro to Loudoun; while doing so, the payment proposition was to cover construction costs by taxing the property around the new rail stations. Fairfax County has a similar arrangement around the Silver Line stations. That is a funding alternative that holds promise. Those who benefit from Metro – riders and station-area developers – and the Federal government should pay to keep the system running.

In closing, the proposed 1% sales tax is bad for Virginia and worse for Loudoun County. Throwing more money at Metro without fixing the WMATA Board and the WMATA Compact ignores Einstein’s observation that doing the same thing over and over again and expecting a different result is insanity.

Dave LaRock is a Republican member of the House of Delegates, serving the 33rd District in Loudoun, Clarke and Frederick Counties.

17 Comments

Posted in Transportation

Dominion Explores Pumped Storage in SW Virginia

Posted on June 27, 2017 by | 21 comments

Graphic credit: Dominion Energy

Much to my astonishment, Dominion Energy is taking a serious look at building a pumped-storage hydro-electric power plant in Virginia’s coalfields. I wrote about the idea back in February but it struck me as a long shot. So much for my superficial impression. It now transpires that Dominion is identifying potential sites in far Southwest Virginia and hopes to narrow the list later this year.

If Dominion decides to proceed, it will notify potentially affected landowners and set up meetings to gain public support, according to Dominion spokesman Greg Edwards. Though still in the early exploratory phase, Dominion describes the prospects as “very exciting.”

The potential impact is enormous. The pumped-storage power station would have a capacity of 1,000 megawatts, making it even bigger than Dominion’s coal- and wood-burning Virginia City Hybrid Energy Center, which cost $1.8 billion to build and generates $6 million a year in tax revenue for Wise County. “We’re talking about revenues way in excess of what Virginia City generates,” Edwards told the Coalfield Progress.

The idea behind pumped storage is to move water between reservoirs at different elevations. Dominion would let the gravity-fed water run turbines, as shown in the company-supplied graphic above, during periods of peak power demand when the cost of electricity is expensive, and then pump the water back to the upper basin when electricity is cheap. The concept is the same as Dominion’s pumped-storage dam in Bath County, the world’s largest.

Pumped storage will be increasingly attractive as eastern utilities increasingly rely upon wind and solar power, which are intermittent sources of electricity. A pumped storage facility could help even out fluctuations in electric production due to variations in wind and sunshine, or even shift power production from periods of peak solar output during the mid-day to peak demand in the late afternoon/early evening. The massive scale contemplated for the project — 1,000 megawatts, roughly equivalent to the capacity of a state-of-the-art gas-fired facility — suggests that Dominion could be considering the plant for load-shifting purposes. And that could be a game-changer.

Source: Dominion 2017 Integrated Resource Plan. Click for legible image.

Dominion’s Integrated Resource Plan foresees the need for a new nuclear power plant by 2030 (under the strictest CO2 regulatory regime), up to five new gas combustion turbines by 2032, and more than 5,000 megawatts of solar power by 2040. I am entering the realm of speculation here — none of this comes from Dominion — but the addition of a giant pumped-storage facility to Dominion’s generating fleet might enable the company to shift more aggressively to solar power and still maintain grid reliability. Potentially, depending upon transmission line limitations, pumped-storage could eliminate the projected need for four 240-megawatt combustion turbines. (How such a shift would impact the demand for natural gas supplied by the proposed Atlantic Coast Pipeline is a big unanswered question.)

The idea originated with coalfield legislators, not Dominion. Del. Terry Kilgore, R-Gate City, Del. Todd E. Pillion, R-Abingdon, and Sen. Ben Chafin-Lebanon, amended the state code to add pumped-storage hydroelectricity generation and storage to the list of projects which, if built in the Virginia coalfield counties, would be deemed “in the public interest.”

Learning of the proposal during the General Assembly session, Dominion quickly began exploring the idea. Early media reports emphasized the idea of using underground mines as a holding tank for the water, but Edwards told the Coalfield Progress, “We’re not wedded to underground.”

So far, Dominion’s investigations into potential sites have involved working with maps and satellite imagery. The company has looked at “literally hundreds” of possible locations. Even if Dominion finds a suitable site, however, it could take seven to ten years until a pumped-storage facility became operational.

21 Comments

Posted in Economic development, Energy

Tagged , ,

Ferguson Deal Will Help Transform Newport News

Posted on June 27, 2017 by | 4 comments

City Center in Newport News. Photo credit: Daily Press.

A couple of weeks ago, the City of Newport News announced an economic development coup: Ferguson Enterprises, the nation’s largest distributor of plumbing supplies and one of the city’s largest home-grown companies, will locate an $82.8 million office project in City Center at Oyster Point.

The new campus will house 1,400 information-technology and administrative jobs, of which 1,000 will be relocated from local offices and 434 will be new hires. Salaries will start at $45,000 before benefits. The company, a $14 billion subsidiary of U.K.-based Wolseley plc, had considered sites in California, South Dakota, Nevada and Washington.

Snagging the investment took $15.6 million in state and local incentives. These include the donation of land valued at $3 million, $4.8 million in property tax rebates over the next decade, $2 million from the Commonwealth’s Opportunity Fund, a $2 million city match, $1 million to build a “skybridge” connection to a parking deck, and $700,000 in road improvements. It’s not clear from press reports where the rest of the local incentives are coming from, although they may be associated with construction of the parking deck.

Clearly, fear of losing jobs was a big motivator in granting the incentives. “A city like Newport News to lose 1,000 jobs would have been devastating,” said Governor Terry McAuliffe at the announcement. “I mean, I know the numbers — this was very competitive.”

Of course, those numbers are confidential, so there is no way the public can gauge the necessity of the incentives. As always, my concern is that a private company mau-maued the state and local government into giving subsidies by threatening to make its investment in another state.

Sometimes cost and labor considerations do make it a sound business decision to locate a major operations center elsewhere. But sometimes it doesn’t –sometimes there are advantages to locating important operational activities in proximity to the corporate headquarters — and the company is just using its leverage to extract tax concessions. Neither the governor’s press release nor the news reports give any indication of which was the case.

Ferguson CEO Frank Roach certainly didn’t sound like raw self interest came into play in the deal. “Ferguson is deeply rooted in the Commonwealth and we have been proud to call Virginia home for more than 60 years,” he said. “We are excited to further invest in the City of Newport News.”

Bacon’s bottom line: Yeah, right. Ferguson is so proud of its Virginia roots that it took $15 million in incentives to keep it here. As a subsidiary of a British company that doesn’t give two hoots about Newport News, such sentimental ties don’t carry much weight. Such rhetoric doesn’t sit well with me. Either it is insincere, or Ferguson wanted to stay in Newport News all along, which calls into question the need for subsidies.

Still, all things considered, the deal could have been worse. Yes, the city will be rebating $4.8 million in property tax rebates over ten years, but that’s only half the tax revenue generated by the property, so it still will gain from the deal to the tune of $480,000 per year.  That will be almost enough to pay off its $2 million state match and $1 million for the skybridge within six years. The city also will build a parking deck, but that was part of the planned development of City Center anyway. As for the $700,000 in road improvements, they can be construed as routine public works.

What I like most about the project was barely alluded to in the official pronouncements: Ferguson will become an anchor tenant in City Center, a nucleus for re-developing a city comprised mainly of a run-down downtown adjoining a sea of suburban sprawl-style development. City Center, a project of the Norfolk-based Harvey Lindsay Commercial Real Estate, constitutes an effort to create walkable, mixed-use urbanism.

That’s exactly what Newport News needs to recruit young workers and retain the businesses that hire them. The city badly needs transformation. While the benefits of creating sustainable land use patterns may be hard to quantify, they are real. 

(Hat tip: Paul Yoon.)

4 Comments

Posted in Economic development, Land use & Development

Tagged

Would U.S. Senate Bill Devastate Virginia’s Medicaid Program?

Posted on June 27, 2017 by | 10 comments

In a preliminary analysis, the McAuliffe administration estimates that the U.S. Senate’s proposed Obamacare replacement bill would cost Virginia’s Medicaid program at least $1.4 billion over seven years. “The legislation currently up for a vote in the United States Senate would blow a hole in Virginia’s budget and severely impair our ability to offer health coverage and long-term care to the people who need them most,” said Governor Terry McAuliffe in a statement released yesterday.

The per capita caps in the Better Care Reconciliation Act of 2017 affect almost every population covered by Medicaid, and would cost Virginia’s program almost double the $708 million that the House-proposed American Health Care Act (AHCA) was estimated to cost over the same time frame, stated the governor’s office.

The difference between the impact of the House and Senate proposals on per capita caps lies in the “annual growth factor” – the estimation of how much costs will increase in the future over a baseline estimate of Medicaid spending. The Senate bill uses a growth factor that estimates lower growth than the House bill – and both houses use a growth factor that is arbitrary. DMAS estimates costs will outpace the growth factor of both bills; that change becomes more pronounced in later years. Provisions in the BCRA that provide safety net funds to providers and eliminate Disproportionate Share Hospital allotment reductions would not directly make up for the losses Virginia would experience from per capita caps.

According to Michael Martz with the Richmond Times-Dispatch, the estimated loss in federal support in Virginia would jump from $117.2 million in fiscal year 2024 to $327.9 million the next year, and then to $493.5 million the year after that.

Bacon’s bottom line: If this is a fair summary of the impact of the Republicans’ proposed health care reform legislation, then it’s a big deal. It would blow a nearly $500 million hole in the state budget for a Medicaid program that is already one of the most austere in the country.

But let’s look a little closer. The McAuliffe administration says that the Senate and House GOP “annual growth factors” are arbitrary. And perhaps they are. But I would like to know what the McAuliffe administration’s cost escalator is, and what assumptions it is based on. How do we know that it is any less arbitrary? As I understand the Republicans’ logic, the Senate bill would generate savings by giving the states more latitude in how they administer Medicaid. Is it inconceivable that Virginia could run the program more cost effectively than it’s being run at present?

I’m not saying that the McAuliffe estimate is wrong, but I do think we need to subject it to some scrutiny before we accept it as valid.

10 Comments

Posted in Health Care

Tagged

Virginia as Nation’s 10th Most Populous State?

Posted on June 26, 2017 by | 3 comments

Source: StatChat blog

Virginia’s population growth has slowed in recent years, but the Old Dominion still is expected to grow faster than the nation as a whole. At current growth rates, Virginia could become the 10th most populous state in the country by 2040, according to Shonel Sen with the Demographic Research Group at the University of Virginia.

During the 2000-2010 decade, Virginia experienced an average annual growth rate of 13%. That has slowed to a 9% growth rate in the current decade, writes Sen in the StatChat blog. But the growth rate of other states has slowed as well.

In 2010, Virginia was the 12th most populous state. Assuming current trends continue, the Old Dominion should surpass New Jersey by 2030, ranking 11th. And by 2040, Virginia will surpass Michigan to become No. 10.

The thing about most trends is that eventually they end. But insofar as the governance philosophies of states remain relatively constant, and insofar as population trends reflect state-level political and economic conditions conducive to economic growth, there is a lot of inertia in population trends in states with large, diverse economies. This scenario actually could happen.

In related commentary, Sen has published a map showing how the geographic center of Virginia’s population has moved since 1940. Just before World War II, the population center was in Cumberland County. As Richmond, Hampton Roads and Northern Virginia urbanized, the center progressively moved east through 1970. Then, as Northern Virginia came to dominate economic and population growth, the center moved due north, and is projected to continue to move north, almost to Fredericksburg, by 2040.

Map credit: StatChat

3 Comments

Posted in Demographics

Tagged

A Fourth Force in Virginia Energy Politics

Posted on June 26, 2017 by | 9 comments

The political economy of energy in Virginia used to be simple. Three main interest groups contended to formulate energy policy in the state: environmentalists, consumers, and electric utilities. Consumers, both homeowners and businesses, pressed for lower electric rates. Environmentalists fought for cleaner air and, more recently, lower CO2 emissions. And utilities — the only parties responsible for keeping the lights on — lobbied for reliability at a reasonable cost (within a framework that preserved profits).

In the last few years, a fourth force has entered the picture, and the political dynamic is changing. The Old Dominion has seen a surge in the number of small, independent solar- and wind-power developers. They have exercised limited political clout, but now large, national corporations embracing a green energy agenda have entered the fray.

Half the Fortune 500 companies have committed to green agendas, and they signaled their desire earlier this year to see policies in Virginia that were friendlier to wind power, solar power and energy efficiency. (See “Clean Energy Options and Economic Development.”) Their message: If Virginia wants to attract outside corporate investment, the state had better get on board the solar-powered electric train.

Then, in an unprecedented flexing of political muscle last week, a green industry group injected itself into the Virginia gubernatorial race. Advanced Energy Economy (AEE), an association of green industry companies, delivered a policy memo to the campaigns of GOP nominee Ed Gillespie and Democratic nominee Lt. Gov. Ralph S. Northam.

“Evolving consumer preferences, dynamic new technologies and aging infrastructure are causing the energy system as we have known it to modernize,” states the memo. AEE outlines four priorities:

  • Allow competitive procurement to attract investment and benefit consumers. Virginia energy policy should open up third-party market alternatives. “While current Virginia law allows competition in statute, more could be done to attract investment and benefit consumers.”
  • Expand access to advanced energy options. The ability to control energy costs is a factor in where many corporations choose to locate. But they’re not just looking for cheap energy — they want green energy.
  • Maximize energy efficiency and demand-response. Under Virginia regulatory regime, electric utilities lose money when customers reduce their electricity consumption, discouraging utilities from investing in energy efficiency programs and demand response. Virginia should “decouple” electricity sales from profitability so utilities don’t lose when they invest in energy efficiency and demand-response programs that cut sales.
  • Modernize the electric grid. Evolving consumer preferences, new technologies, and the need to replace aging infrastructure have created a need to modernize the electric grid. The regulatory system, which inadvertently stifles innovation, needs to be modernized.

AEE wants more wind and solar, more electric vehicles, more energy efficiency, more innovation, and more freedom for entrepreneurs to design solutions for customers. At the same time, the association acknowledges that the way to achieve these aims is not to browbeat electric utilities into submission but to change their incentives, which would take a major re-writing of regulatory law.

Bacon’s bottom line: To advance AEE’s vision, Virginia would need an upgraded electric grid flexible enough to accommodate a less centralized, more distributed grid while still maintaining system-wide reliability. In effect, the green businesses are calling for a deregulation of electric power production. But no one wants to build a competitive and redundant electric transmission-distribution system.

Any viable energy system of the future must allow electric utilities to continue investing in, and earning a profit on, their transmission-distribution systems. Also, deregulation of electricity generation would require grappling with the issue of “stranded” investments — investments in generating capacity that utilities made in good faith under the existing regulatory environment that might not be economical and must be scrapped in deregulated environment.

Like the environmental movement, this Fourth Force in energy politics wants to see a fundamental transformation of Virginia’s electric power system. Unlike the environmentalists, many of whom see Dominion and Appalachian Power as the enemy, the Fourth Force acknowledges the need for a healthy utility sector. This new interest group has plenty of money, which means it can afford to hire lobbyists and spread cash to political campaigns. Plus, these new voices will be more credible to Virginia’s pro-business legislators than the more strident environmentalists had been. 

The politics of electric power in Virginia has reached an inflection point. We are entering a new era.

9 Comments

Posted in Energy, Environment, Politics

Tagged ,

Failing to Fix the Unfixable

Posted on June 25, 2017 by | 5 comments

Cranky (aka John Butcher) is on a tear these days, most recently exposing the Virginia Board of Education’s ineffectual effort to fix the City of Richmond’s broken school systems.

The Richmond’s schools are in turmoil. According to the state board, 27 of the city’s 44 schools are not fully accredited. The school board has booted out the district’s superintendent, who only two or three years ago had been highly touted, for reasons that remain opaque. City and state bureaucracies are moving ponderously to address the deep-rooted dysfunction. But so far, the only product of the teeth gnashing and foot dragging is a “Memorandum of Understanding,” which, in Cranky’s jaundiced eyes, “does nothing but create busy work and a ‘rough draft’ plan that is not a plan.”

Cranky proceeds to dismember the MOU like Jeffrey Dahmer rended his victims. The MOU, he suggests, is vague, redundant, intrusive, and unenforceable. Worst of all, he writes, “VBOE does not know how to fix Richmond’s broken school system. They don’t know what to tell a judge that Richmond should be made to do, so they don’t even contemplate exercising their authority to sue.”

If you want to find yourself laughing and crying at the same time, check out his post.

5 Comments

Posted in Education (K-12), Governance

Tagged

Coping Gracefully with Depopulation

Posted on June 25, 2017 by | 18 comments

Map credit: Virginia Department of Mines, Minerals and Energy

A Roanoke Times editorial asks a provocative question: “Should we just let Appalachia go?” Instead of trying to rebuild a new economy in far Southwest Virginia, should the commonwealth just allow the region to depopulate?

As the editorial points out, the Appalachian mountains and hollers were sparsely populated through the 18th and 19th centuries. Then, in the late 1800s there arose an industrial economy that ran on coal. “Coal happened. Railroads happened. People — many of them immigrants — poured into Appalachia. Roanoke was not the only boom town to spring up then. So did lots of other communities deeper in coal country.”

After an efflorescence during the last 70s/early 80s, coal went into decline. Mechanization eliminated jobs. Thicker, efficient-to-mine coal seams played out. Environmental regulations drove up the cost of mining and combusting coal. And natural gas began displacing coal in the utility market. As long as high-quality metallurgical coal used in steel making can be mined in Appalachia, mining will never totally disappear. But coal will be a shadow of the industry it once was.

Virginia’s coalfields have tried to diversity their economies, but they suffer enormous competitive disadvantages. They are geographically remote, far from large urban centers and interstate highways. They have a paucity of flat land suitable for industrial development. The workforce is poorly educated, substance abuse is widespread, and most ambitious young people who earn college degrees leave for better employment prospects elsewhere. And the quality of amenities and public services is low so that everyone who made significant wealth in coal mining moved out of the region. There is no moneyed business class to spark an entrepreneurial revitalization.

Some coal counties refuse to die. Wise County has been especially creative in trying to reinvent its economy around broadband, data centers and solar energy. Recent state legislation that would favor pumped storage as a complement to solar farms has Dominion Energy giving a serious look at the region. The economic impact of such a facility, if ever built, would exceed that of Dominion’s $1.8-billion Virginia City Hybrid Energy Center, which burns coal and biomass. But the economics of these dreams remain unproven.

“It’s hard to see what industries exist in which Appalachia has a comparative advantage as vast as it had in coal,” the Roanoke Times quotes economist Lyman Stone as writing. “I’m not saying none do or could ever exist; I’m just saying that if they can or do, they don’t seem extremely clear right now.”

In Stone’s estimation, without coal mining to prop up the economy, Appalachia’s population has a long way to fall. He writes: “We can’t let hopes blind us to realities. On some level, population must be associated with economic activity to support it. Coal mining is still declining, and when it’s completely gone, it’s not clear how much economic activity will remain, and therefore how much population can be sustained.”

Bacon’s bottom line: As much as I hate to acknowledge it, Stone’s prognosis is correct. The 21st century economy belongs primarily to populous urban areas. I wouldn’t discourage coalfield residents from trying to salvage their communities — indeed, I very much hope they succeed. But even if creative-thinking localities such as Wise succeed in diversifying their economies, data centers, solar farms and pumped-storage facilities employ very few workers beyond the construction phase. Such projects would bolster the local tax base, enabling counties to maintain basic services, so they are worth pursuing. But they won’t reverse the depopulation of the region.

The coalfield counties, like other remote, rural counties in Virginia, need to think how to decline gracefully. Hard-hit cities and towns in the Midwestern rust belt are learning how to cope with shrinking populations, and perhaps it’s possible to learn lessons from them. What rural counties do not need to do is invest scarce resources in desperate, long-shot bids to turn around their economies. The circumstances are dismal, but living in denial of economic reality will only make things worse.

18 Comments

Posted in Economic development

Tagged ,

About Those School-to-Prison Pipeline Numbers…

Posted on June 23, 2017 by | 19 comments

Gerard Lawson

Two years ago the Center for Public Integrity (CPI) released a study reporting that Virginia led the nation in sending students from schools — 16 out of 1,000 — to police or the courts. That finding fueled demands to overhaul k-12 disciplinary practices to reduce the so-called “school-to-prison pipeline.”

Well, it turns out that those numbers were wildly inflated.

“When we look at the official Juvenile Justice records to see who actually went to court from the schools, the number is actually 2.4 per 1,000,” says Gerard Lawson, an associate professor at Virginia Tech’s school of education.

Lawson and his colleagues conducted the research to find what factors led to student involvement in the pipeline and how those factors could be mitigated, according to a Virginia Tech news story. Here’s what they found:

The researchers launched the study in January 2016, drawing data from several state agencies, including the departments of Juvenile Justice, Education, and Criminal Justice Services.

“At the very outset we realized the numbers weren’t matching up,” said Lawson, who is also president-elect of the American Counseling Association. “We scoured the data between the Departments of Education and Juvenile Justice, matching localities, dates of birth, dates of offensives, types of offenses, and we realized that the number of students actually ending up in court was much lower than that first impression.”

There is a checkbox on a Department of Education tool gathering data about suspensions and expulsions which asked, “Was this reported to law enforcement?”

“In most cases, when the box was checked, it appears that it represented an informal report to law enforcement — an administrator running into the school resource officer in the hallway, for example, and mentioning that a student had been suspended.” Lawson said. “The ‘report’ may have gone no further than the officer responding, ‘Thanks—good to know.’ With a bit of semantic imprecision, that checkbox elevated Virginia’s numbers dramatically.”

However, Lawson’s study did confirm two trends highlighted by the CPI study: students with disabilities were more likely to be suspended, and African-Americans, representing 23% of the student population in Virginia, accounted for 49.4% of the court referrals.

“We need to rethink discipline,” says Lawson. “Should a middle-schooler get arrested for flipping the bird at a teacher? The stakes are too high. A single suspension makes it less likely for a student to graduate from high school, and involvement with the Court system makes that less likely still. The repercussions can be lifelong.”

Bacon’s bottom line: Lawson should be commended for debunking the misinformation that Virginia is an outlier in the realm of school discipline. I always wondered about that claim — I never heard a logical explanation of why Virginia school officials supposedly referred so many more kids to law enforcement than their peers in other states. But when I wrote about the CPI research, I never thought to dispute it. Now we know why the numbers were so high.

However, I have to question one of Lawson’s insinuations. Middle-schoolers have been arrested for flipping the bird to their teachers? Really? If true, such actions are absolutely outrageous, and disciplinary procedures do need reform. But my “spidey sense” makes me suspicious. It would take a judge about two nano-seconds’ reflection to throw that out of court. I find it hard to believe that such a thing has ever happened. Perhaps Lawson was just using hyperbolic rhetoric, not to be taken literally. Or perhaps I’m just naive.

Returning to the main storyline… Let’s play a little parlor game, shall we? How much media attention will Lawson’s story get compared to the the Center for Public Integrity’s flawed report? Will the Center for Public Integrity ever correct its findings?

Update: The editors of the Center for Public Integrity offer an extended rebuttal of Lawson’s findings (and Bacon’s Rebellion’s reporting of those findings). You can read their comment here.

Update: Gerard Lawson has responded to my question about “flipping the bird,” defends his contention that it is very difficult to rank the states for law-enforcement referrals, and offers other observations. Read his comment here.

19 Comments

Posted in Courts and law, Education (K-12)

Tagged

Don’t Bet the Farm on Population Projections

Posted on June 23, 2017 by | 2 comments

Source: StatChat blog

The Demographics Research Group at the University of Virginia is the entity tasked with making official population projections for the Commonwealth of Virginia and its localities. Their projections feed into all manner of planning documents across the state. If the projections are off, so are the forecasts for school attendance and transportation demand. Getting the numbers right is a big responsibility.

Hamilton Lombard, a research specialist for the group, assumes an appropriate air of humility regarding long-range projections.

Forecasting population change, like forecasting the weather, is complex, requires one to make assumptions about the future, often based on past trends, and is rarely spot on,” he writes in the StatChat blog. “Because population projections are less familiar to the public, projections are often treated as something closer to a fact, rather than a forecast that can and likely will change. Unfortunately, not understanding population projections can lead to much larger problems than a rained out barbecue.

In the chart above, Lombard traces the history of state population projections for the year 2000 beginning in 1975. The 25-year projection was off by a significant margin. But, as a rule, shorter-term projections are more accurate, and the 10-year projection hit very close to the mark.

Numbers tend to be less accurate for localities because demographic trends tend to be more volatile. As an extreme example, Lombard cites, projections made of Bath County’s population jumped around 1980 when the lightly populated county experienced an influx of construction workers to build the Bath County pump storage facility. “Because of the temporary rise in Bath County’s population,” Lombard writes, “the projections expected the county’s population to keep growing, even after the 1990 census showed that most of the power plant construction workers had left.”

Bacon’s bottom line: Forecasting increased population for Bath County by projecting a trend line based on a temporary influx of construction workers was utterly foolish. Someone should have been strung up by the thumbs. Fortunately, not much was at stake (well, not much for anyone except, perhaps, the residents of Bath County). But sound planning for billions of dollars of transportation and infrastructure investments depends upon reliable population estimates.

For the 50-year reign of suburban sprawl, forecasters could reliably predict a shrinking of Virginia city populations and growth in surrounding suburban counties. Then an inflection point occurred in the mid-2000s when population and business began reversing the trend — moving from the burbs into core urban areas. Straight-line projects based on 2000 population trends would have gotten the numbers very wrong. I would urge Lombard to reconstruct the history of population projections for the year 2020 projections going back 25 years. I suspect he would find a much wider gulf between forecast and reality than in the graph shown above.

As long as the economy is in a steady-state condition, predictions tend to be reasonably accurate. When inflection points occur, forecasts go widely astray. Today demographers must ask, how long will the urban revitalization movement last? Will cities continue to gain population? Will the growth rate of counties continue to slow? Answers to those questions are beyond the ability of demographers to predict, for they depend upon the willingness of cities and counties alike to adopt policies that promote the kind of denser, mixed-used development that can accommodate growing populations.

So, as Lombard counsels, understand the limitations of long-term demographic projections. If demographers could predict the future with 100% accuracy, they wouldn’t be demographers — they’d be making a killing on Wall Street.

2 Comments

Posted in Demographics

Tagged

Business Leaders Demand WMATA Governance Reform

Posted on June 23, 2017 by | 11 comments

An alliance of Washington-region business groups is calling for a fix for the Washington Metropolitan Area Transit Authority (WMATA) that would create dedicated funding streams for the Metro rail system and a restructuring of the authority’s board.

Twenty-one chambers of commerce and employers groups outlined the proposal in a letter to the region’s political leaders, reports the Washington Post. The proposal is expected to have influence, the Post says, noting that executives with the signatory businesses are frequent campaign contributors.

WMATA has said it needs at least $500 million a year to restore to functioning condition the commuter rail transit system, which has been plagued by maintenance issues, safety incidents, and declining ridership. The letter signatories did not specify a particular funding mechanism.

“We’re not trying to get into the weeds,” said Bob Buchanan, founder of the 2030 Group, told the Post.

One commonly floated proposal is a region-wide, penny-per-dollar sales tax, but Northern Virginians have objected on the grounds that Northern Virginia would wind up paying more than Maryland and the District of Columbia combined.

Describing the Metro as in a state of “crisis,” the letter linked the creation of a dedicated revenue source toward a revision of the tri-state governing compact and a restructuring of the board. States the letter:

We reiterate our strong conviction that any reform effort must include reforms to WMATA’s governing, financial and operational structures. Reform of any one structure alone will not be sufficient. For instance, additional funding for Metro will only be beneficial if it is accompanied by structural changes that give WMATA’s board the flexibility to effectively allocate resources and staff the flexibility to leverage additional resources to make operational improvements.

Governance reforms include “right-sizing” the WMATA board and requiring directors to have expertise in specialized areas, including transit operations, management, finance and safety.

Bacon’s bottom line: WMATA is critical to the functioning of the Washington metropolitan region. After decades of short-changing maintenance, WMATA needs billions of dollars to remain a viable transportation mode. There is no avoiding the necessity for regional taxpayers to cough up more money to restore the rickety system to health. Washington-area residents have been enjoying the benefit of a heavy-rail transit system for years without paying its full cost — now it’s time to pony up. But given WMATA’s dismal history, the NoVa business leaders are absolutely right to demand reforms that will ensure that any new funds are not mis-spent or frittered away in concessions to WMATA labor unions.

Working out a compromise with Maryland and D.C. won’t be easy, but Virginia’s political leaders need to hang tough.

11 Comments

Posted in Governance, Transportation

Tagged ,